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National Policy on Software Products (2019)

I. Preamble

I.1. The Information Technology and
Information Technology Enabled Services (IT-ITES) industry of the
country is a critical pillar in India’s economic growth. The industry
has potential to be a driving force for enabling India to develop
capabilities for harnessing new technologies cutting across all the
sectors, namely, agriculture, health, education, manufacturing etc,
thereby creating significant employment and entrepreneurial
opportunities. According to NASSCOM the sector at present is generating
an estimated revenue of around USD 168 billion, including export of USD
126 billion on an annual basis, which is around 8% contribution to
India’s GDP. The industry is also one of the largest organised sector
employers, generating nearly 14 million direct and indirect jobs. It is
further estimated that the industry can contribute up to 350 billion USD
accounting to ~10 percent of India’s GDP by 2025.

I.2. The Digital India Programme,
launched by the Government in 2015, has ensured that the Indian IT
industry delivers world class services at competitive quality and costs.
The programme is leading to a transformation of India into a
knowledge-based economy and digitally empowered society based on
technology that is inclusive, affordable and sustainable. This has
ensured digital access, digital infrastructure, digital empowerment and
bridging of digital divide with the common thread of digital inclusion.
As a result, India’s Digital footprint is one of the fastest growing in
the world with the potential to become a Trillion Dollar Digital Economy
by 2025. India’s movement of digital transformation is finding global
resonance.

1.3. The India’s IT industry is
predominantly a service led industry. There is tremendous scope for
Indian Software Products to build upon the strength of Indian IT
industry, and the innovative & technological capabilities in the
country. As per NASSCOM Strategic Review 2017, the Global Software
Product Industry is estimated to be USD 413 billion. However, the
contribution of Software Products in Indian IT-ITES revenue is just USD
7.1 billion out of which 2.3 billion USD are exports. On the other hand
import of Software Products is estimated to be nearly 10 billion USD, so
as such India is a net importer of software products at present.
Therefore, it is prudent to develop a conducive Software product
ecosystem to transform a predominantly service oriented Indian IT/ITeS
industry into a technology oriented products industry.

1.4. The Software product ecosystem is
characterised by innovations, Intellectual Property(IP) creation and
large value addition increase in productivity, which has the potential
to significantly boost revenues and exports in the sector, create
substantive employment and entrepreneurial opportunities in emerging
technologies and leverage opportunities available under the Digital
India Programme, thus, leading to a boost in inclusive and sustainable
growth.

1.5. The development of the software
product industry will result in positive externalities for the entire
spectrum of the Indian IT/ITeS sector, and hence for the overall
economy, by facilitating development of platforms that ensure that
technology-based solutions are generated for sector-specific areas, that
will tap the untapped growth potential of the sector concerned.
Further, leveraging new and emerging technologies like Artificial
Intelligence, Internet of Things, Block Chain etc. to the maximum
advantage across sectors of the economy requires higher levels of
innovation, keeping pace with the advancement of technology globally.
The value addition that will so occur will boost the growth rate of each
of the sectors by realisation of the immense potential therein, that is
largely yet to be exploited to the fullest.

1.6. To realise the potential of the
software product industry in India in an optimal manner, there is a need
for a framework where industry, academia and government work in synergy
to bring about a paradigm shift in the IT/ITES sector of the country.
The “National Policy on Software Product” (NPSP) is the first
significant step towards achieving this goal. The policy aims to develop
India as the global software product hub, driven by innovation,
improved commercialisation, sustainable Intellectual property (IP),
promoting technology start-ups and specialised skill sets, for
development of the sector, based on ICT.

II. Terms & Definitions

For the purpose of this policy and its implementation following terms and definitions will be considered:
a. Indian Company: As per sub-section 26 of section 2 of the Income Tax
Act, 1961, “Indian company” means a company formed and registered under
the Companies Act, 1956 or Companies Act, 2013, provided that the
registered office or, as the case may be, principal office of the
company, corporation, institution, association or body in all cases is
in India.
b. Indian Software Product Companies (ISPC): An ISPC is defined as an
Indian company in which 51% or more share holding is with Indian citizen
or person of Indian origin and is engaged in the development,
commercialisation, licensing and sale /service of Software products and
has IP rights over the Software product(s).
c. Software Product: Software product is a programme used or produced by
a computer or network which can be stored or transmitted through an
electronic medium and offers some form of utility. In addition, such a
product can be protected in India through permissible Intellectual
Property Right laws and can be commercialized for use through licensing.
d. MSME: The definition of MSME will be as per Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 or amended from time to time
by administrative department.
e. Startup: The definition of startup will be as per Gazette
Notification No. G.S.R. 364(E) dated April 11, 2018 notified by
Department of Industrial Policy and Promotion (DIPP) or amended from
time to time by administrative department.

III. Vision

To develop India as a Software Product
Nation and a global leader in conception, design, development and
production of intellectual capital driven Software Products, thus,
accelerating growth of entire spectrum of IT Industry of the country.

IV. Missions

(i) To promote the creation of a
sustainable Indian software product industry, driven by intellectual
property (IP), leading to a ten-fold increase in share of the Global
Software product market by 2025.
(ii) (ii) To nurture 10,000 technology startups in software product
industry, including 1000 such technology startups in Tier-II and
Tier-III towns & cities and generating direct and in-direct
employment for 3.5 million people by 2025.
(iii) (iii) To create a talent pool for software product industry
through (i) up-skilling of 1,000,000 IT professionals, (ii) motivating
100,000 school and college students and (iii) specialise 10,000
professionals that can provide leadership.
(iv) (iv) To build a cluster-based innovation driven ecosystem by
developing 20 sectoral and strategically located software product
development clusters having integrated ICT infrastructure, marketing,
incubation, R&D/test beds and mentoring support.
(v) (v) In order to evolve and monitor schemes & programmes for the
implementation of this policy, National Software Products Mission will
be set up with participation from Government, Academia and Industry.

V. Strategies

1. Promoting Software Products Business Ecosystem
i. An Indian Software product registry will be created through industry
ownership. This will act as a common pool of Indian Software Products
thereby providing a trusted trade environment.
ii. A conducive environment will be created in order to facilitate active participation of software companies in Capital Market.
iii. A Single Window platform will be established for facilitation of
Indian software product industry in fast-tracking legal and regulatory
issues regarding (i) import and export and (ii) opening and closure of
software product enterprises.
iv. A classification system for Indian software products will be evolved
through a model HS code. The model HS code will be further sub
categorized based on the type of software products, its inter-linkages
with other economic sectors, including services and hardware
manufacturing. Such model classification will facilitate tracking and
easing of export of such products. This will also help in evolving
statistical data for further promotion of specific sectoral software
products.

v. The Indian Software Product Companies
will be allowed to set off tax payable, if any, on the investments made
(on an accrued basis) in R&D of indigenous software products.

2. Promoting Entrepreneurship & Innovation for Employment

i.In order to create a conducive
ecosystem, a programme of incubation will be initiated to nurture at
least 10,000 software product startups, thereby generating direct and
indirect employment for 1 million persons. 1000 of these startups shall
be targeted to be set up in Tier-II and Tier-III town & cities. The
programme will provide (i) Technical & Infrastructure assistance,
(ii) Mentoring Support, (iii) Seed Fund, (iv) R&D & Testing
facilities (v) Marketing and Branding support.

ii.A dedicated Software Product
Development Fund (SPDF) with a corpus of Rs. 1000 Crore will be created
in the form of Fund of Funds. SPDF will participate in venture fund to
provide risk capital so as to promote scaling up of market ready
Software Products. The fund will fill the gap between the capital
requirements of technology and knowledge based software product startup
enterprises and funding available from traditional institutional lenders
such as banks. This scheme will create a corpus of Rs. 5000 Crore with
an end target to have at latest 100 Indian software product companies
having valuation of Rs. 500 Crore or employing 200 persons. The SPDF
will be financially managed by a professional Financial Institution/
Asset Management Company as per SEBI guidelines. Spin off effect of such
activity would create other support services and further employment.
iii. A Programme to support Research and Innovation on Software Products
in Institutes of Higher Learning and Research will be initiated with a
budgetary outlay of Rs. 500 Crore with participation from Government,
Academia and Industry. The objective of the programme is to bridge the
existing gaps in the Industry-Academia research and facilitate
development of novel, high quality affordable software products through
research and innovation. Financial support in form of a Grant-in-aid
will be provided to Indian MSMEs and start-ups for undertaking such
collaborative research with academic/ research institutes leading to IP
development. To ensure that such research outcomes are absorbed in
participating MSMEs businesses a matching fund from such applicants will
be a pre-requisite for government grant. An expert organisation having
established capabilities to professionally manage innovation and
research leading to commercial translation will be identified to
operationalise the fund.
iv. A programme for organising 20 dedicated challenge grants will also
be initiated with an aim to solve societal challenges, such as in
Education, Healthcare, Sanitation, Agriculture, persons with special
needs (Divyangjan) etc in collaboration with line Ministries, state
governments and Industry Bodies/ Think Tanks. The Research fund will
also support such challenge grants/ hackathons for identifying software
product solutions for societal challenges.
v. A Programme to create 20 domain specific Indian software product
clusters around existing industry concentrations, such as in automobile,
textile, financial services, electronic manufacturing, energy etc will
be initiated. These clusters will have integrated ICT infrastructure,
marketing, incubation, R&D/test beds and mentoring facilities.
Technical and financial support will be extended up to 500 technology
companies so as to achieve global foot print.
vi. A Centre of Excellence will be set up to promote design and development of software products with industry participation.
vii. A common upgradable infrastructure will be created to support
startups and software product designers to identify and plug cyber
vulnerability.

3. Skilling and Human Resource Development

i. For catering to large scale
requirement of trained manpower in futuristic technologies, a
FutureSkills programme has been initiated for upskilling/re-skilling of 3
million IT Professionals in emerging technologies. For creating a
talent pool of 1 million IT professionals with competencies required for
IP driven software products, a special emphasis on modules related to
software products will be added into the programme. This will be
implemented through (i) modification in existing course curriculum, (ii)
short term training programme, (iii) national competency tests in
consultation with the industry. The programme will be implemented in
partnership with educational institutes, both public and private,
identified industry bodies and the National Skill Development Mission.
ii. A national “Talent Accelerator” programme targeting, 100,000 school
and college students, will be initiated for motivating young talent for
software product development.
iii. A talent pool of 10,000 committed software product leaders will be
created that can meet the distinct skill set requirement for the sector
to move up the value chain for developing technology and intellectual
capital for product industry and will be suitably interlinked with the
mentor pool for software products incubators and clusters.

i. The registry of Indian software
products will be integrated with Government e-market (GeM) and will also
provide necessary handholding for marketing support.

ii. Indian Product Startups / MSMEs will
be encouraged to develop solutions for Smart Cities, healthcare,
agriculture, e-learning, transport, fin-tech and addressing social
challenges, such as, bridging digital divide, gender inequality,
empowering the less privileged citizens and divyangjans. A series of
hackathons will be organised to identify such startups / MSMEs, who will
be suitably rewarded on successful development.

iii. Implementation of open APIs will be
proactively promoted both for public and private sector to foster
incremental innovation and to encourage inter-operability in Indian
software products ecosystem.iv. An enabling framework will be developed
for preferential inclusion of Indian software product in Government
procurement in line with the Public Procurement (Preference to Make in
India), Order 2017.

v. Special focus to Indian Software Products will be provided in international trade development programmes by:
a) Integrating Indian software products in India’s foreign aid programmes.
b) Providing opportunities and access under the various market
development assistance programmes to showcase innovative products and
solutions in important events, exhibitions, trade fairs etc.
c) Setting-up of specialized infrastructure in India and abroad for
Software Product development so as to enhance presence of Indian
Innovation in global markets.
vi. Industry will be encouraged and incentivised to develop products to
overcome language barriers across major Indian Languages and to create
technological bridges between them and major international languages
including English.

5. Implementation Mechanism

i. The Government shall establish a
“National Software Product Mission (NSPM)” to be housed in Ministry of
Electronics and IT (MeitY) under a Joint Secretary, with participation
from Government, Academia and Industry.

ii. The broad objectives of the mission will be as follows:-
a) Design appropriate strategy for development of the software product
industry to ensure optimum utilization of its potential and to establish
India as a global Software Product Hub.
b) Recommend specific policy measures to ensure an enabling ecosystem
for design, development, innovation, value addition, (take other words
from Vision), based on use of ICT.
c) Recommend specific initiatives to be undertaken to tap the full
potential of the domestic and the international markets for the Software
product industry.
d) Monitor and collate various initiatives taken under this policy with
an aim to create 3.5 million employment opportunities and boost software
products revenue tenfold by 2025.
e) Facilitate various Government agencies and other bodies in promotion
of Software Products, specific to the various programmes envisaged under
this policy.
f) Encourage States to participate in programmes and promote Indian Software Products in line with this policy.
g) Monitor SPDF, Research & Innovation Fund.
h) Take any other measures as may be required in the context.

iii. The Policy will be implemented by
MeitY through initiation of appropriate programmes & schemes, as per
recommendation of NSPM, in which MeitY’s organizations, such as,
Software Technology Parks of India(STPI) shall play a lead role besides
Centre for Development of Advanced Computing (CDAC), National
Informatics Centre(NIC), Industry/ Industry bodies and Institutes of
Higher Education & Research.